Build Small

Give a good, hard thought to how much living space you really need. If you can do without certain rooms, take them out of the blueprint. Just cut them out, and let other rooms perform multiple functions. Also consider making rooms smaller. If the bedroom is only for bed-related activities, then how much space do you need in there other than for the bed, a closet and a few drawers? Plan your rooms so that they will give you the space you need, and don't go beyond that. The smaller the house, the cheaper it is to build.

Build an Unconventional Structure

Traditional box-type houses are not cost-efficient. They are simply traditional. If you are willing to live in a different kind of structure—if you are willing to open yourself up to the world of cottages, geodesic domes, cabins, teepees, “mini-houses” and other cost-efficient small structures—then you have an opportunity to save a lot of money simply by laying out a less expensive project to begin with. These structures often have the added benefits of improved safety and environmental sustainability.

Use Inexpensive Materials

Not only are traditional box-type houses not cost-efficient, but the demand for the materials to build these widespread homes only makes them that much costlier. Whether or not you are building a conventional house, the best way to save money is to use alternative materials that can be had at a much lower price. At every step in the design process, ask yourself if you can replace a given building material with a cheaper alternative that will still get the job done without posing unacceptable changes to the design.

Utilize Your Own Labor

Most of the work of building a house does not require a skilled contractor. You can do it yourself, perhaps with cheap or free help from your spouse, friends and family. Most of the plumbing, wiring and structural assembly is accessible even to people with little prior skill in the area. You can count on making mistakes, and you may have to have a contractor come in later to correct any mistakes that go unnoticed, but you will learn a great deal about homebuilding, and you will save a lot of money on labor costs.

Use Small Parcels in Affordable Areas

The land itself is a big part of the cost in building a house. If you have yet to purchase land, consider looking for a small parcel in a lower-income neighborhood. You could also buy land in the suburbs or the countryside, but the commuting costs would catch up with you over time, so you would need to plan on having income that didn't require commuting.

Share the Costs

You can build a house for less by spreading the costs. For example, if this is a second house, then you can timeshare it with other families. Or, if you have a large lot, you can build a duplex or add a mother-in-law unit that can generate rent.

Alternatively, and somewhat contrary to many of the above steps, you could build a very large house, and then invite your extended family to live with you in exchange for sharing the costs of construction and property tax.